Landlord Ins. vs Homeowner's Ins. For Long Term Rental
Queesbury, NY · Member since 2017 · 21 posts · 17 votes
We are just starting down the RE path and have a ton of questions. Before I can find the answer I have thought of 3 other questions I need answers to. Just trying to avoid any massive mistakes that would sour this buy and hold plan that I have decided to focus on.
I am wondering about insurance for the rental property. I just heard the other day about Landlord Insurance. Didn't even know that was a thing. I'm wondering what exactly it covers that HO doesn't and how much extra I would be expected to pay for that coverage.
Does anyone have any guidance for me on this matter?
You might want to consider requiring (or at least encouraging) tenants to purchase "renter insurance" as well. These policies can cost as little as $15-$20 a month and insure the tenant's possessions as well as liability coverage for their guests should there be an accident of some kind. (It's not in place of your own landlord policy but in addition to....)
Howdy @Mike Montanye Welcome to BP!
It's great to hear that you are interested in pursuing the real estate path, and I understand that there are many questions and concerns that can come up along the way. I'm happy to help in any way I can to provide guidance and support, however, the community is great here and will help also.
Regarding your question about insurance for the rental property, you are correct that there is a specific type of insurance for landlords called Landlord Insurance. This insurance policy typically provides coverage for the structure of the rental property, as well as liability coverage for any injuries or damages that may occur on the property. It may also offer protection for loss of rental income in the event of property damage or other covered events.
It's important to note that Landlord Insurance typically costs more than a standard homeowner's insurance policy, but the exact cost will depend on various factors such as the location and condition of the property, the value of the property, and the amount of coverage you require.
In addition to Landlord Insurance, you may also want to consider other types of insurance such as liability insurance or umbrella insurance to further protect your assets and investments.
I hope this information is helpful, and please don't hesitate to reach out if you have any further questions or concerns. Best of luck on your buy and hold plan!
**Although I hold a broker's license, it's important to note that I don't have all the answers. However, I highly recommend that you speak with an insurance agent who is familiar with the location where you are considering purchasing a property before making a purchase. They will have the expertise to guide you through the insurance options and coverage that are specific to the area and type of property you are interested in.
You might want to consider requiring (or at least encouraging) tenants to purchase "renter insurance" as well. These policies can cost as little as $15-$20 a month and insure the tenant's possessions as well as liability coverage for their guests should there be an accident of some kind. (It's not in place of your own landlord policy but in addition to....)
Hi @Tim Johnson. Nice to meet you.
Yes, renter insurance. Nice add on!
Mike,
I posted these in past couple of weeks. I think it applies to your situation now & in the future:
Post about the different types of insurance you may need:
"I was just discussing this at a Real Estate Meetup. When you are a real estate investor, you face different Insurance requirements depending on the project:
1. Flip: Renovation Builders Risk, General Liability, Workers Comp., ... are possible needs
2. Renovate & Hold: The above plus Vacant Building coverage, Dwelling/Fire coverage, Umbrella,..
3. Buy & Hold: Depends on the size of the property (# of units) and what the use (Apartments, Retail, office, etc.)
Be aware that it is unlikely that the best coverage for all the situations would be with the same Insurance company. You will most likely have several Insurance Companies for different properties or projects.
Because of the above, I would suggest you work with an Independent Agent (represents multiple Insurance companies). They should be able to write (and be knowledgeable in) both Personal & Commercial coverages. Look for recommendations of other investors, check online, and be sure to interview the prospective agents to judge their knowledge and experience in the Investment area."
Post about Landlord Insurance (Dwelling Fire Policy):
With the vast majority of Insurance companies, you will need to change from the Homeowners policy once it is rented. The normal policy for a rented 1-4 family dwelling is a Dwelling/Fire policy. If the house will be vacant after you move, you need to check with your agent and find out if you need to move to a vacant dwelling policy until it is rented. Most homeowners have a clause built in to the form that lowers important coverage (vandalism, pipes bursting, etc...) if the home is vacant or unoccupied for a certain number of days.
When you do move to the dwelling fire policy you should be looking for:
1. Building coverage: It should be valued at Replacement Cost. That is the cost to rebuild with the same kind and quality. Note that the building costs have risen since COVID so the limit on your existing homeowner may not be enough. The Perils (things like Fire, Theft, Wind, etc.) on the policy should be at "Special Form"
2. Loss of Rents (could also be called Business Income): Limit should be adequate to cover 12 months of rental income
3. Liability: I usually recommend maxing out the limits that you can get on the policy (most companies will go up to $500,000 and some will do $1,000,000). You may want to consider and umbrella policy to get additional Liability coverage.
4. medical Payments: Covers medical costs incured in an accident on the premises. It is designed to pay without determining fault and to avoid lawsuits for small claims. Most policies will offer $5,000 but some will have higher limits available. Discuss with your agent the cost/benefit of higher limits
5. Other structures: For detached structures such as garages, sheds, etc. Limit should be enough to rebuild the structures
6. Contents: this would be coverage for your contents (not the tenants). Things like tools and maintence supplies, removable appliances, furniture you suppy,... The coverage should be Replacement cost and either Special form or named perils (some policies will only do named perils)
7. Optional coverage: Discuss with your agent what additional coverage is available and what you should add. Coverage like the following may be available:
- water backup
- service line coverage
- equipment breakdown
- Personal Injury
If you are changing the title to an LLC, Corp, or trust be sure to let the agent know the new ownership. The policy should be the same named insured as the ownership.
Hope the above info is helpful. Feel free to PM me if you have any questions on the above.